Pixar Nixes the Mouse

Looks like Pixar and Mickey have had their final chat by the office watercooler.

Pixar Animation Studios ended talks with former production partner Walt Disney Co. on Thursday after spending months locking horns with Mouse execs over extending the studio's distribution contract.

The current deal between the two companies had them splitting box-office receipts and licensing revenues, while Disney held on to the rights to sequelize joint productions such as Toy Story and Monsters, Inc.

Pixar boss Steve Jobs said that the animation house would seek a new deal with a different studio.

"After 10 months of trying to strike a deal with Disney, we're moving on," Jobs said in a statement. "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."

The deal that Jobs wanted, and that Disney chief exec Michael Eisner wouldn't budge on, would give Pixar exclusive ownership of its future movies, as well as 100 percent of box-office profits and the majority of other revenue earned. In exchange, Pixar would pay Disney a 10 percent distribution fee. (The deal was patterned on the same one George Lucas has with 20th Century Fox for his Star Wars films; Jobs and Lucas are long-time friends--in fact, Jobs bought Pixar from Lucas in 1986.)

Jobs will now begin negotiating with 20th Century Fox, Sony and Warner Bros. for future Pixar projects.

Eisner said Disney management rejected Pixar's final offer because it would have cost the company hundreds of millions of dollars that it has coming under the current agreement.

"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," Eisner said in a statement.

Disney shareholders Roy Disney and Stanley Gold were less phlegmatic in their reaction to the Pixar split, and make it clear that they held Eisner accountable.

"As significant shareholders of the Walt Disney Company, we are extremely dismayed, but not surprised by the loss of Disney's Pixar relationship," the duo, who quit the Magic Kingdom last year after losing a power play against Eisner, said in a statement. "More than a year ago, we warned the Disney board that we believed Michael Eisner was mismanaging the Pixar partnership, and expressed our concern that the relationship was in jeopardy.

"Michael Eisner's inability to manage and nurture crucial creative relationships, like the one Disney had with Pixar, is one of the main reasons we have maintained that we did not believe Disney's earnings were sustainable."

Working as a team, the two studios produced five films together--Toy Story, Toy Story 2, A Bug's Life, Monsters, Inc. and Finding Nemo--grossing more than $2.5 billion at the box office since 1995.

Still in the works are two more films--The Incredibles, due in November, and Cars, set to bow in 2005. Disney will pocket 60 percent of the profits from the two films; after that, all ties will be severed between the two studios.

In leaving Disney, Pixar walks away from characters it created, such as clownfish cutie Nemo, of Finding Nemo fame, and chatty cowboy Woody from the Toy Story franchise.

Disney retains the copyright to all characters created under the now-defunct partnership, as well as the right to sequelize as it sees fit. The Mouse House says it will go forward with Toy Story 3 without Pixar.

Roy Disney and Stanley Gold expressed their admiration of the Pixar crew's work and stated they felt the split would result in negative repercussions for Disney.

"Steve Jobs, John Lasseter and their team are enormously talented. Pixar has hit five grand slam home runs in five times at bat for Disney," the pair said in their statement. "While we expect that the tail of the relationship will continue to provide short-term earnings gains, the loss of this relationship, we believe, will result in the loss of long-term value for the company and its shareholders."

Pixar announced the split after the stock market closed Thursday and saw an increase in its shares, while Disney shares dropped.