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Pixar in Distribution Talks With Studios

Posted on: Thursday, 6 February 2003, 06:00 CST

source: Associated Press

By GARY GENTILE, AP Business Writer

LOS ANGELES - Pixar Animation Studios would like to renew its film distribution deal with The Walt Disney Co., but has opened talks with other film studios as it readies its fifth computer-animated film, "Finding Nemo, Pixar chairman and chief executive Steve Jobs said.

"While our first choice is doing business with Disney, under a different form, this is far from certain at this point," Jobs said Thursday during a conference call with analysts.

Pixar already has approved production for its first feature film outside the Disney deal and is on the verge of approving a second film, Jobs said. It must still deliver three more films, including "Finding Nemo" to Disney, which means its first film outside the deal could not be released until 2006.

Studio executives from Warner Bros. and other studios have visited Pixar's campus in Emeryville, Calif., but serious negotiations have not yet begun, according to people familiar with the talks.

Jobs said Pixar is getting a feel for what his company's films are worth on the open market, knowledge that will bolster his negotiations with Disney.

"We're clearly learning that and we're learning that some of the other studios do things differently, some better, some worse," Jobs said in an interview.

Disney has not yet begun talks with Pixar and feels no rush, with three films still to go in their deal.

"I'm optimistic, encouraged, but can't say it's a slam dunk," Disney chairman and chief executive Michael Eisner said recently.

Pixar is looking for a better financial split for the films it produces and Disney releases.

Currently, Disney and Pixar split the profits from the films, but the current deal results in a higher take for Disney, which also gets a distribution fee of 12 percent to 15 percent of each film's revenue.

Disney also owns the films and can use characters in their theme parks at no cost. Disney also retains the rights to make sequels, although the contract gives Pixar the first right to produce them.

Jobs has made no secret of his desire to cut a better deal, including retaining ownership of the films. He also takes every chance during Pixar conference calls to remind analysts that Pixar films have outperformed most Disney-produced films in recent years.

As Pixar reported record 2002 earnings Thursday, Jobs mentioned that its hit "Monsters Inc." is the second biggest animated film of all time, with $524 million in worldwide theatrical ticket sales.

Disney had struggled at the box office with recent disappointments such as "Treasure Planet" and "Atlantis: The Lost Empire." Even Disney's 2002 hit "Lilo & Stitch" brought in about $146 million domestically, compared to "Monsters Inc.," which earned $256 million.

Jobs, however, also praised Disney's effort to promote "Finding Nemo," saying the marketing campaign was the biggest the studio has mounted for any film. The film opens May 30.

Also Thursday, Pixar reported net income of $17 million, or 31 cents per share in the quarter ending Dec. 28, compared to $13 million, or 25 cents per share in the same quarter last year.

The results easily beat the expectations of analysts surveyed by Thomson First Call, who had expected earnings of 22 cents per share.

Revenue in the quarter rose 50 percent to $39.4 million from $26 million in the same period last year, driven mainly by box office receipts from "Monsters Inc."

Pixar also posted record profit for the full year on the strength of greater than expected revenue from DVD and home video sales and rentals of "Monsters Inc." and other library titles. For 2002, Pixar reported net income of $89.9 million, or $1.68 per share, compared to $36.2 million, or 71 cents per share in 2001.

Analysts had expected 2002 net income of $1.58 per share.

Revenues jumped to $201.7 million from $70.2 million in 2001.

Pixar shares were down $1.19 to close at $54.42 on the Nasdaq Stock Market.

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On the Net:

Pixar Animation Studios: http://www.pixar.com

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