• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Disney Purchases Longtime Partner Pixar for $7.4 Billion, Bringing Together Blockbuster Movie Powers

Posted on: Wednesday, 25 January 2006, 09:00 CST

By George Avalos, Contra Costa Times, Walnut Creek, Calif.

Jan. 25--Pixar and Disney's decision to get hitched in a $7.4 billion deal leaves the companies poised to revolutionize the way Hollywood and Silicon Valley deliver entertainment and the way consumers get it.

At face value, Walt Disney Co.'s deal to buy Emeryville-based Pixar Animation Studios, announced Tuesday, formally marries two companies that had become estranged over their agreement to jointly deliver several feature-length films. This deal preserves and expands that partnership, which produced blockbusters such as "Toy Story,""A Bug's Life" and "Finding Nemo," all created by Pixar's computer animation technology.

The most visible short-term outcome of Disney's proposed purchase of Pixar in a stock and cash deal is that Disney will gain access to the computer animation being crafted at Pixar's Emeryville complex. At the same time, Pixar will be assured continued access to Disney's marketing and distribution muscle into a reliably broad audience for Pixar films. Pixar also will be able to have a larger market for its characters, such as at theme parks or on the ABC TV network.

The ultimate impact could reach much further. Tech impresario Steven Jobs, who will join the Disney board, could blend the innovative spirit and cutting-edge breakthroughs of Silicon Valley with the mass-market reach and broad consumer appeal of Disney.

"Steve Jobs is the tech executive who has the greatest understanding of technology and content," said Tim Bajarin, principal analyst with Silicon Valley market researcher Creative Strategies. "Jobs will absolutely help Disney bridge the gap between Silicon Valley and Hollywood."

And in an early sign of Jobs' clout, his chief lieutenant at Pixar, John Lasseter, will be Disney's chief creative officer, returning to the studio where he once worked as an animator to oversee movies as well as additions to the Burbank company's theme parks.

"Bringing more technocrats into the mainstream media fold will help a lot for the changes that are coming," said Michael Tchong, a trend analyst with San Francisco-based Ubercool, which tracks the tech industry. "Jobs is a power player in the tech business, the music business, the movie business. And now he can go after television and the theme park business."

This marriage of Hollywood and Silicon Valley comes when technology has become a crucial catalyst for entertainment, Tchong said.

"Steve's vision will slowly start to dominate all of Disney," Tchong said. "Jobs will help Disney understand issues such as digital cinemas and digital downloads of first-run movies and audio to consumers at home."

"Entertainment is changing in terms of the number of options available for consumption, purchasing and distribution of content," said Steven Lidberg, an analyst with Portland, Ore.-based investment firm Pacific Crest Securities. "It's a very exciting time for consumers."

The wedding also may enable Pixar to pick up the production pace of its movies.

"Over time, we will likely see more Pixar films," Lidberg said. "Pixar will get greater flexibility and increased creative talent. Pixar will be able to ramp up its production capacity."

Yet the two companies, with two very different cultures, could clash.

"It is encouraging that Disney appears to be leaving Pixar fairly autonomous," Lidberg said. "The greatest risk is Pixar has a great track record that could be disturbed if Disney interferes too much."

Still, in some ways, the two companies may have had little choice but to cement such a deal. They may have had far more to lose going their separate ways.

"Disney has had few animation hits other than the ones they did with Pixar," said Brandon Gray, president of Box Office Mojo, which tracks the movie business. "Pixar is arguably the most successful movie studio right now. And Disney couldn't quite re-create Pixar's magic on its own."

Pixar's six feature-length animated movies have generated an average worldwide box office of $540 million each, including a domestic average box office of $243 million, Gray said.

In contrast, Disney's last animated movie deemed anything close to a success was "Lilo and Stitch," released in 2002. "The movie after that, 'Treasure Planet,' was a disaster, and the other movies that followed had middling success," Gray said.

In addition, Disney faces growing foes: Paramount recently bought the DreamWorks studio, which was co-founded by Steven Spielberg.

For Pixar, it faced the uncertainty of how it would fare without a big partner in marketing movies.

"With this deal, Disney can continue to be the most important animation company in the world," Bajarin said. "And Pixar and Steve Jobs will be at the center of it."

George Avalos covers the economy, financial markets, insurance and banks. You can reach him at 925-977-8477 or gavalos@cctimes.com.

-----

Copyright (c) 2006, Contra Costa Times, Walnut Creek, Calif.

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

NASDAQ-NMS:PIXR, NYSE:DIS,

Source: Contra Costa Times (Walnut Creek, Calif.)

More News in this Category