Disney's bonehead move to end its partnership with Pixar

Posted Friday, January 30, 2004 at 9:25 AM Central

by Tim Briscoe

Discussions between Pixar Animation Studios and the Walt Disney Company to extend their partnership have collapsed. Thus bringing to an end a very successful collaboration.

You know the players. Disney, perhaps the world's best brand name, is synonymous with kid and family-friendly, quality entertainment. Pixar, close to being a household name itself, is responsible for the computer-animated hits Toy Story, Monsters, Inc. and Finding Nemo. Their partnership was a match made in profit heaven.

But that's all about to end, more or less. After Pixar produces two more feature films (this November's The Incredibles and next year's Cars) for Disney, the two companies will sever ties. Pixar head (and Apple Computer CEO) Steve Jobs made the announcement, "After 10 months of trying to strike a deal with Disney, we're moving on."

According to an Associated Press report, negotiations stalled on Pixar's request to have the exclusive copyrights for the five films it released through Disney plus the next two. That's a lot of money for product licensing and both companies realize it. The deal Jobs wanted would have given Disney only 10% of the box office take in exchange for distrubtion.

OK, here's why this is a dumb move on Disney's part. The last five theatrical films produced by Disney's own animation department were Brother Bear, Treasure Planet, Lilo & Stitch, Atlantis, The Emperor's New Groove. The total domestic box office revenue for these films was $437.7 million--and that's not even counting the studio's should-have-been direct-to-video releases like Piglet's Big Movie and The Jungle Book 2 which grossed no more than $50 million each. Of course, Pixar's five theatrical films were Toy Story, A Bug's Life, Toy Story 2, Monsters, Inc. and Finding Nemo. Total U.S. box office take for those was $1.2 billion. Yes, that's billion with a "B". This proves without the shadow of a doubt that Pixar is making the kind of movies America wants to see.

Now just fathom the toy and product licensing profits for each of these films. I'm guessing there were a lot more Monsters, Inc. lunchboxes sold than those for Treasure Planet. Licensing is Disney's bread and butter.

Finally, consider this fact. Disney just last year closed its Orlando, Fla. animation studio and has dropped its animation staff from a peak of 2,200 in 1999 down to just 600.

Also add to the mix the rising force of Dreamworks' animation studio. They had a little movie called Shrek bring in $267 million in 2001 and will have its sequel this year. That's all thanks to former Disney animation head Jeffrey Katzenberg--a.k.a. the "K" in Dreamworks SKG.

Pixar's distribution rights will go to another studio, we can only assume. And that's the worst part of it all for Disney. Pixar is now in the hands of the competition. Ten percent revenue is better than just handling over all those millions (I mean, billions) to someone else.

So who will court Pixar now? Place a heavy bet on Warner Bros. Even the studio's number one property of Bugs Bunny and gang could only manage a dismal $21 million late last year with Looney Tunes: Back In Action.

Fox is a good possibility too. Especially when you consider that Pixar started as an off-shoot of Lucasfilm and George Lucas has a similar distribution-only deal with Fox for the Star Wars prequels.

You can even consider Paramount a dark horse in the running. Imagine the synergy it could have between Pixar and Paramount/Viacom's Nickelodeon property.

No matter the future, this stands to be a big-time faux pas on Disney's part. Roy Disney -- the nephew of Walt who was recently booted off Disney's board of directors by head mouseketeer Michael Eisner for his differing opinions on the future of the company -- is pissed. He is still a major shareholder of Disney stock and a force Eisner still has to reckon with.