This article was updated at 10:00 p.m.
Steve Jobs has pushed himself away from the negotiating table.
After spending much of the past year locked in talks with Mouse House execs over an extension of the current Disney-Pixar co-production pact, the Pixar chief said Thursday he’s looking elsewhere for a distribution partner for the animation studio.
Twentieth Century Fox, Warner Bros., Universal and Sony are considered possible new Pixar partners. Prior to entering exclusive talks with Mouse brass, Jobs visited top execs at several of the Hollywood majors and a round of more substantive meetings is expected. The big question is who will be willing to give Jobs the kind of deal head Mouseketeer Michael Eisner wouldn’t: 100% of the distributors’ split of box office, a modest distribution fee and the lion’s share of ancillary revenue.
The Pixar topper said the partners’ parting would be sweet sorrow.
“After 10 months of trying to strike a deal with Disney we’re moving on,” Jobs said. “We’ve had a great run together — one of the most successful in Hollywood history — and it’s a shame that Disney won’t be participating in Pixar’s future successes.”
Disney responded with its own judiciously worded statement.
“We have had a fantastic partnership with Pixar and wish Steve Jobs and the wonderfully creative team there, led by (chief creative exec) John Lasseter, much success in the future,” Eisner said. “Although we would have enjoyed continuing our successful collaboration under mutually acceptable terms, Pixar understandably has chosen to go its own way to grow as an independent company.”
News of the developments quickly had Hollywood abuzz with speculation about the cause of the breakdown and its effect on the industry’s feature animation dynamics. Disney-Pixar blockbusters — from 1995’s “Toy Story” through last year’s “Finding Nemo” — have dramatically shifted industry focus to such computer-generated fare, with Disney and others struggling by comparison with traditional, cel-animated releases.
It appears the most nettlesome area in Disney-Pixar negotiations was the toon studio’s demand that the Mouse dramatically rein in existing terms on two pics in the current co-prod pact — “The Incredibles,” set for release in November, and “Cars,” a holiday 2005 title.
A top exec at Disney, speaking anonymously, said Mouse negotiators were prepared to wrap the ’04 and ’05 titles into any new contract with Pixar and was similarly resigned to allowing Pixar 100% of all future distributors’ B.O. in exchange for funding production entirely. (The partners’ current pact splits production costs evenly.)
Indeed, Disney’s press release on the cessation of talks seemed to place an emphasis on the demands regarding “Incredibles” and “Cars.” The release attributed an analysis of the collapse to Mouse’s chief financial officer Tom Staggs, though it did not quote him directly.
“Tom Staggs … said Disney management could not accept Pixar’s final offer because it would have cost Disney hundreds of millions of dollars it is already entitled to under the existing agreement, while not providing sufficient incremental returns on new collaborations to justify the changes to the existing deal.”
A well-placed source said it didn’t help the talks when Disney vice chairman Roy Disney recently ankled the Magic Kingdom, claiming mistreatment by Eisner. Pixar’s Lasseter is fond of Walt Disney’s nephew and viewed his departure with alarm, the source said.Disney and another former Mouse director Stanley Gold have been operating a SaveDisney.com Web site to advocate a change in conglom management. On Thursday, the duo predicted an end to Mouse’s relationship with Pixar would harm Disney.
Some questioned whether the Disney-Pixar talks had collapsed irrevocably. If such proves the case and the current co-prod agreement ends, Pixar will still be bound to give Disney a 50% split on B.O. from “The Incredibles” and “Cars,” as well as a 13% distribution fee on each movie.
Meanwhile, execs at other studios were clearly salivating over the prospect of a relationship with Pixar once its pact with Disney ends after the release of “Cars.”
“We would love to be in business with Pixar,” Warners spokeswoman Barbara Brogliatti said.
“Who wouldn’t want to be in business with these people?” Sony spokeswoman Susan Tick said. “They’re brilliant at what they do.”
Fox could have a slight advantage in any talks with Pixar, if only because the studio already has had a similar distribution-only relationship with George Lucas on the last couple of “Star Wars” pics. In fact, a key adviser to Jobs on the Disney talks has been Gordon Radley, longtime prexy at Lucas Digital.
Pixar punts sequels
Pixar announced the end to the talks with Disney after the close of stock market trading, with its shares climbing in after-hours activity and Mouse shares dropping. But some believe the news will ultimately prove a negative for Pixar, as it will walk away from any participation in potential sequels to successful Mouse co-prods “Finding Nemo,” “Monsters, Inc.” or even a “Toy Story 3.”
“They’ve effectively relinquished the rights to their library,” said Michael Savner, an analyst with Banc of America Securities. “For all intents and purposes, we’re probably done with any sequels.”
Should Disney choose to do any sequels to the computer-tooner hits on its own, Pixar would likely get only a modest royalty fee. Technically, Pixar would retain the right to co-finance and co-produce any sequels, but nobody expects they would exercise such a right once they’ve formed an association with another studio.
And Mouse would likely take a direct-to-video approach to any such projects in any event, further limiting profitability.
B of A’s Savner fears Pixar and its new distribution partner will find it harder than usual to identify attractive release dates for their co-prods, as Disney will no longer be bound to stay clear of Pixar pics on the release calendar. Mouse has been contractually obligated to avoid scheduling conflicts between Disney-Pixar releases and its other family titles.
As for Disney, execs will have to sell shareholders on the notion that a deal with Pixar would have been against conglom’s best interests. And that could prove a tough sell, considering the five Pixar movies to date have produced more than $2.5 billion in B.O., a large chunk of which has gone into Mouse coffers.
Plan B for Mouse
Mouse has already begun laying contingency plans for life after Pixar. Most notably, it’s struck a development relationship with Vanguard Films — the creative team behind DreamWorks’ computer-animated hit “Shrek” — and Complete Pandemonium, a Canadian toon shop.
Of course, its massive other tooner operations continue full tilt as well, despite recent downsizing. Next up for release is the traditionally animated “Home on the Range,” skedded to unspool April 2, and three inhouse produced computer-animated pics are set for release in summer 2006.
Disney shares closed up 78¢ at $24.45 on Thursday. Pixar shares rose $1.05 to $64.20.