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Old 10-01-2003, 11:32 AM   #1
BRERALEX
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2006 pixar movie

Posted on Mon, Sep. 15, 2003

High stakes at Disney, Pixar talks
By CLAUDIA ELLER
Los Angeles Times

HOLLYWOOD - Walt Disney Chairman Michael Eisner is straining to make, or break, a deal with Pixar Animation Studios by the time the entertainment giant's board meets at month's end.

The difficult bargaining, which has been under way for the last two weeks, finds Disney and its animation supplier far apart on key issues, according to people familiar with the talks.

Open points include financial terms, whether productions under way would be swept into the new agreement, and how Disney would coordinate the release dates of its animated films with Pixar-supplied movies in which Disney would no longer have ownership under a new deal, the people said.

The stakes are unusually high: Pixar-produced films, including "Finding Nemo" and "Monsters, Inc.," have generated more than $1 billion in total profit for the partners and accounted for about half of Disney Studios' operating profit in recent years.

Eisner hopes to get his board, which is scheduled to meet Sept. 23, to approve a new financial arrangement that would continue his company's 12-year alliance with Emeryville, Calif.-based Pixar -- or to endorse a break-off that would leave Pixar and its chairman, Steve Jobs, free to find a new Hollywood partner.

Representatives of both companies declined to comment on the discussions.

But Disney insiders have made clear that their willingness to concede ground has limits -- notwithstanding Pixar's extraordinary string of five consecutive hits, beginning with the release of "Toy Story" in 1995.

"We're not going to do a deal that's bad for this company," said one top Disney executive.

A Disney source said negotiations probably would stretch beyond the scheduled board meeting, despite Eisner's eagerness to present a plan. The chairman doesn't need the board's approval, but wants its blessing for a decision that appears critical for the company.

The talks were triggered when Pixar last month presented Disney with an aggressive proposal that would extend the companies' five-film deal, but only if the Burbank, Calif.-based company would agree to a radical change in their relationship.

Under the proposal, Disney would give up its 50 percent ownership in Pixar-produced films, agreeing instead to distribute the pictures, possibly for a fee of 10 percent or less, sources have said. A major sticking point is Pixar's demand that even upcoming films "The Incredibles" and "Cars," both due under the current contract, be subject to the more Pixar-friendly terms of the proposed deal.

Pixar has extraordinary leverage in the talks because competing studios such as AOL Time Warner Inc.'s Warner Bros., News Corp.'s 20th Century Fox, and Sony Corp.'s Columbia Pictures have made clear their willingness to enter negotiations with the computer animation powerhouse.

Jobs, who successfully squeezed Disney to renegotiate his original 1991 contract after "Toy Story" turned into a runaway hit, has been further emboldened by a belief that Pixar's brand name now rivals Disney's among filmgoers, according to sources.

Disney puts up half the production cost of Pixar films in return for 50 percent ownership, but also collects a distribution fee of 12.5 percent, giving it more than half the profits from each film.

The studio is said to be balking not only at Pixar's new financial demands, but also at contractual terms that might limit its ability to position its in-house animated films. Disney is wary, for instance, of ceding too much space on its release schedule for Pixar films that it would no longer own -- a condition that might prove particularly galling to Disney studio chief Dick Cook, a longtime film distribution executive who is conducting day-to-day negotiations with Pixar.

Despite the tough bargaining, Disney and Pixar have good reason to find common ground. Disney's global marketing and distribution strength has been a strong complement to Pixar's expertise with technology and story development. And Pixar might find a new marriage awkward in one key regard: Disney would continue to hold lucrative sequel rights in all of its existing films.

Eisner and Jobs have long been at odds over the business of sequels. The Disney chief has insisted on enforcing contractual terms under which they don't count toward the films Pixar owes Disney, while the Pixar CEO has argued that they should count. The standoff has stalled the production of a third installment of the "Toy Story" series.

After delivering "Finding Nemo" to Disney this spring, Jobs was contractually free to enter into a new distribution arrangement with another studio, although any new deal wouldn't take effect until after the release of "Cars" in 2005. The huge success of "Nemo" -- it has taken in $334 million at the U.S. box office and become the highest-grossing animated film in history -- only boosted a bargaining position that was already strong.

Flush with cash, Pixar last February approved production on what is intended to become the first movie outside the existing Disney deal. Jobs has tried to keep details of this so-called "Project 2006" under wraps, though details have leaked in various news reports.

The new film has been said to be about a rat named "Ratatouille," who lives in a fancy Parisian restaurant. The picture is being directed by Jan Pinkava, who made Pixar's 1998 Oscar-winning short, "Geri's Game."

Pixar will be sole owner of "Ratatouille," and which studio serves it to the marketplace remains to be seen.

sorry if thi has already posted, found it at aintitcool
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Old 10-01-2003, 11:38 AM   #2
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***"Jobs, who successfully squeezed Disney to renegotiate his original 1991 contract after "Toy Story" turned into a runaway hit, has been further emboldened by a belief that Pixar's brand name now rivals Disney's among filmgoers, according to sources."***

What renegotiation was this ? I've only read about the failed attempt to get TS2 to count. Any info out there ?
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Old 10-01-2003, 12:13 PM   #3
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Vike:

I don't have the details in front of me, but there was a renegotiation of the deal after the TS2 fireworks were laid to rest.

Quote:
Under the proposal, Disney would give up its 50 percent ownership in Pixar-produced films, agreeing instead to distribute the pictures, possibly for a fee of 10 percent or less, sources have said. A major sticking point is Pixar's demand that even upcoming films "The Incredibles" and "Cars," both due under the current contract, be subject to the more Pixar-friendly terms of the proposed deal.
All right, DB et al. We can stop talking about the past, and worry about the present. Here is basically the same situation that AV has pointed out happened back during the TS2 fiasco.

Job$ is asking to renegotiate the deal, and to include "The Incredibles", helmed by Brad Bird--the guy who directed the awesome (although I don't think the language added to the movie at all) animated feature, "The Iron Giant"--and "Cars", which is I think Lassiter's next feature?, in the new contract.

Do you do a 'bad deal for the company' as it was called last week by giving up the points on these two films? Or is it really a 'bad deal' when you can lock up Pixar for a long term contract, and use the two films as a hook to get better terms for the new contract?

Now it is kind of hard to say that this didn't go on back in the TS2 era when it is playing out in the newspapers today. This is exactly what I remember reading about back then.
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Old 10-01-2003, 12:28 PM   #4
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***"Job$ is asking to renegotiate the deal, and to include "The Incredibles",........."***

This bothers me and I'm not sure I can put into words why. Why would Jobs be willing to renogotiate anything ? Why is he hanging a future carrot out to Disney in exchange for a bigger piece of the pie on the last two flicks ? Is he worried that with no deal at all Disney will be forced to become a direct competitor with him in the CGI biz ? Is he worried Disney may be able to produce a quality product of their own and that their brand name and distribution power could have a negative affect on future Pixar releases ?

I guess if I'm Jobs, and I have the talented animators and writers, I have the software & hardware, I have a powerful brand name in Pixar and I got cash on hand..... why am I even offering Disney anything other then the bare minimum ? What am I missing ?
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Old 10-01-2003, 12:49 PM   #5
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Hi Viking,

The biggest things you might be missing is one of the more boring (yet important) aspects of entertainment:

Marketing and Distribution

Pixar may have the best product (and their films are evidence of this) but it is the Disney machine that churns out the big bucks and knows how to squeeze the most out of what they have.

IMHO, Pixar needs Disney as much as Disney needs Pixar.

That being said, there is no doubt that Pixar could do well on its own. The question is, what is the delta between profits on their own and profits partnered with Disney?

In essence, as the wise man once asked, do you want to be rich or super rich?
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Old 10-01-2003, 12:50 PM   #6
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Maybe he realizes that the sum is greater than the parts?

Disney + Pixar has been pretty successful so far.

Maybe also, he's heard the whispers that Ei$ner is gone soon. Maybe he's betting that the new head is someone who will either ramp up CGI if Pixar bolts (potentially bad for Pixar) or who will see the benefit of expanding the relationship (potentially good for Pixar).
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Old 10-01-2003, 01:09 PM   #7
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Still doesn't change anything Larry. I'm not "giving" anything without getting something in return. And if all Jobs is offering is a working relationship for a less than 10% dist. fee and very little peripheral incentives regarding sequels, character rights, etc...Then what's the point? Disney needs to gain something or have the opportunity to gain something for the effort. They don't need to cater to Jobs only so they will be associated with his works...
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Old 10-01-2003, 01:56 PM   #8
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"Disney needs to gain something..."

Aye - and there's the rub. No matter what they do, no matter what happens -

Disney looses.

They either loose the supplier that generated half of the studio's profit's over the years; or they loose the deal that generated half the studio's profits over the year.

Disney looses.

By striving to be nothing but a middle man, Disney has thrown itself on the whims and favors of others. Pixar, the guys with the product, are now able to hold Disney's future for ransom. And Disney sans Pixar will be forced out onto the open market - anyone really think that anyone else is going to sign a Pixar like "we've sold our soul to Disney for distribution" deal with Disney these days? And what kinds of movies are you likely to get from such a player (now that the field is so well established and ALL the studios are bidding for talent - very unlike the Toy Story days).

The truth from my persepective is that it doesn't really matter if Pixar "stays" or flees for greener fields. Disney now has to survive with whatever scraps Pixar is willing to throw them, or whatever scraps they can find laying about the table.

All because they're too damn lazy to make their own movies.
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Old 10-01-2003, 02:15 PM   #9
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***"All because they're too damn lazy to make their own movies."***

Well, maybe this will force them to get off their lazy ***'es and get to producing pictures again. Maybe Job's is the best friend we have right now.

Of course you have to remember, my glass is half full.
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Old 10-01-2003, 03:05 PM   #10
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Quote:
Originally posted by airlarry!
Vike:

I don't have the details in front of me, but there was a renegotiation of the deal after the TS2 fireworks were laid to rest.

All right, DB et al. We can stop talking about the past, and worry about the present. Here is basically the same situation that AV has pointed out happened back during the TS2 fiasco.

Job$ is asking to renegotiate the deal, and to include "The Incredibles", helmed by Brad Bird--the guy who directed the awesome (although I don't think the language added to the movie at all) animated feature, "The Iron Giant"--and "Cars", which is I think Lassiter's next feature?, in the new contract.

Do you do a 'bad deal for the company' as it was called last week by giving up the points on these two films? Or is it really a 'bad deal' when you can lock up Pixar for a long term contract, and use the two films as a hook to get better terms for the new contract?

Now it is kind of hard to say that this didn't go on back in the TS2 era when it is playing out in the newspapers today. This is exactly what I remember reading about back then.
Larry, if you can find this characterization of the 1999 dispute, please do, and post the stories here. I believe even characterized Jobs' approach as "Count TS2 toward the minimum, and we'll talk about #6." This proves nothing about the TS2 dispute. They are, after all, clearly negotiating an extension of the deal at this point.

It also has nothing to do with whether or not Disney should cut the deal at this point. Either the deal is good enough for both sides, or its not.

Note, by the way, that the inclusion of the next two pictures in an improved Pixar deal is something that only Disney can offer--the only way Pixar improves its cut on those pictures is by re-upping with Disney.
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Old 10-01-2003, 03:08 PM   #11
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Quote:
Originally posted by KNWVIKING
***"Jobs, who successfully squeezed Disney to renegotiate his original 1991 contract after "Toy Story" turned into a runaway hit, has been further emboldened by a belief that Pixar's brand name now rivals Disney's among filmgoers, according to sources."***

What renegotiation was this ? I've only read about the failed attempt to get TS2 to count. Any info out there ?
The 1997 Co-Production Agreement, for five new movies (not counting Toy Story) replaced an earlier agreement which, I believe, was for three movies, including Toy Story.

I think the characterization of the 1997 Agreement as Disney being squeezed by Jobs is clearly in error. It was an extension of that prior deal, and I don't believe it increased Pixar's cut significantly.
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Old 10-01-2003, 03:30 PM   #12
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Quote:
I think the characterization of the 1997 Agreement as Disney being squeezed by Jobs is clearly in error. It was an extension of that prior deal, and I don't believe it increased Pixar's cut significantly.
Hmm, DB, that's strange, because Job$ stated in the 1996 annual report that Disney kept "over 85 percent of all profits" in the original three picture deal, and the pictures were branded as "Disney" pictures, but that with the new deal:
Quote:
Pixar and Disney will split 50/50 all of the profits from the films and related products, including home videos, merchandise, interactive products, sequels, and made for home video sequels. This gives Pixar a dramatically higher share of the profits than we had under the old deal.
and all products licensed would be co-branded.

What did Pixar give up to get this? Pixar had to start financing 50% of the production costs.

Hmm. There is also a note that says that Disney folded on one other important point that we have been talking about:
Quote:
The remaining two pictures from the original deal become the first two pictures of the new partnership. Pixar will reap the benefits of the new partnership, including its higher share of profits and co-branding, at least four years sooner than we would have under the old deal.
Now why would Cou$in Mikey do that? No CEO in his right mind would give up terms on two remaining pictures just to get a five picture deal that included those two pictures, would he?

Just as sure as he wouldn't give up The Incredibles and The Cars to get an even longer picture deal with better terms for Pixar, would he?

Of course he would.

Mikey can say what he wants in public, but privately he is nervous, because it is as evident as the Mikey-headed buttered croissant he is munching on right now as he reads this post that Pixar has realized Lassiter's goal of becoming the Disney of CGI.

Mikey may be stupid, but he's still greedy enough to figure out where the money train is.

DB, I'm only tweaking your nose on this one because I haven't had time to pull out my old Pixar annual reports so couldn't respond with factual statements last week. (I have said before that your posts are well-thought out and make good points, but sometimes the facts gets in the way of a good argument).

But I remembered reading in those letters from Job$ a long time ago that Pixar got a bigger cut for a bigger risk. People don't remember now, but at the time, Toy Story was a hit, but not a 'Finding Nemo' hit. What if Lassiter couldn't pull it off again? Pixar was saddled with 50% of the costs of a clunker, for a company that had just gone public? The stock price would have tanked had Bugs Life pulled 'Cats Don't Dance' or 'Treasure Planet' like numbers.

Thankfully, the story had a happy ending. Lassiter has become Uncle John, and Cou$in Mikey should either restart The Secret Lab (dang near impossible at this point) or resign himself to the fact that Job$ has a full house, and Mikey only has a pair of Kings.

http://www.pixar.com/companyinfo/inv...996/index.html
Quote:
We like working with these guys.
What happened since 1996 to make Job$ et al change their minds? (rhetorical question?)
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Old 10-01-2003, 04:27 PM   #13
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Larry, over and over and over you keep making the point that it would have been good business, and would be good business now, for Disney to give up some of its existing contractual rights for a mutually beneficial long-term extension.

Let's try to put a stop to that right now. NOBODY IS ARGUING WITH YOU ON THIS POINT.

What is far from obvious, however, is that there was (or is now) a long-term extension available on terms that would be acceptable to Disney (even a Disney headed by a more visionary leader than ME).

From the article, it looks like what's on the table is a 10% distribution fee for some unknown number of films, in exchange for, at least, (1) giving up the 50% interest in the next two films, and (2) continuing release window protection. Does that sound like a good deal to you? Will Mikey be making the wrong choice if he turns this down?
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Old 10-01-2003, 04:33 PM   #14
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Quote:
Originally posted by airlarry!
Hmm, DB, that's strange, because Job$ stated in the 1996 annual report that Disney kept "over 85 percent of all profits" in the original three picture deal, and the pictures were branded as "Disney" pictures, but that with the new deal: and all products licensed would be co-branded.
Thanks for the correction--I hadn't looked it up.

But, given that the 1997 agreement WAS a complete restructuring of the deal, isn't it even more outrageous that within the first months after it was signed, Jobs was trying to renegotiate it again?
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Old 10-01-2003, 04:35 PM   #15
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Quote:
Originally posted by airlarry!
Just as sure as he wouldn't give up The Incredibles and The Cars to get an even longer picture deal with better terms for Pixar, would he?

Of course he would.
Agreed, and if you look at some of my posts on the other threads speculating how the negotiations might go, I said this very thing some time ago.
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