Case Coy Story
© 2003, DOW JONES & COMPANY, INC. ALL RIGHTS RESERVED
www.barrons.com
MONDAY, OCTOBER 13, 2003
Coy Story
Will Steve Jobs jilt Disney? No matter what happens, Pixar stock seems overvalued
TINY PIXAR IS THE HOTTEST TICKET in Hollywood. Fresh off the huge success of its latest animated movie, "Finding Nemo," an emboldened Pixar is bargaining hard over a new film-distribution agreement with its partner, Disney, while weighing offers from other studios. "Finding Nemo" is the highestgrossing movie in the U.S. this year, with projected domestic box-office revenue of more than $335 million. "Nemo" is expected to generate over $1 billion of revenue after international distribution and video sales, netting about $500 million in total profits. "Finding Nemo" is the latest in a five-film string of Pixar-made, Disney-distributed winners that' s included "Toy Story," "Toy Story 2," "A Bug' s Life" and "Monsters Inc." Based on unconfirmed reports out of Hollywood, Disney and Pixar may be near a deal giving Steve Jobs, Pixar' s chief executive and controlling shareholder, much of what he wants. Jobs is seeking to give Pixar greater profits and control of its next two movies, which are governed by the existing agreement with Disney. Pixar' s "The Incredibles" is due in late 2004 and "Cars" in November 2005. The current agreement gives Pixar, which is based in Emeryville, Calif., and Disney equal profits from the next two movies after Disney is paid a distribution fee estimated at 12% to 13% of total revenues. This effectively gives Disney more than 60% of each movie' s profits. Pixar BY ANDREW BARY and Disney share the cost of producing and marketing the movies, which can run over $200 million for each. Jobs also reportedly wants Pixar to get all the profits from its eighth movie, due in late 2006, in return for bearing all the costs. Disney would get just a distribution fee of 7% to 10% in the new arrangement. Under the terms of the current Disney contract, Pixar was
www.barrons.com
MONDAY, OCTOBER 13, 2003
Coy Story
Will Steve Jobs jilt Disney? No matter what happens, Pixar stock seems overvalued
TINY PIXAR IS THE HOTTEST TICKET in Hollywood. Fresh off the huge success of its latest animated movie, "Finding Nemo," an emboldened Pixar is bargaining hard over a new film-distribution agreement with its partner, Disney, while weighing offers from other studios. "Finding Nemo" is the highestgrossing movie in the U.S. this year, with projected domestic box-office revenue of more than $335 million. "Nemo" is expected to generate over $1 billion of revenue after international distribution and video sales, netting about $500 million in total profits. "Finding Nemo" is the latest in a five-film string of Pixar-made, Disney-distributed winners that' s included "Toy Story," "Toy Story 2," "A Bug' s Life" and "Monsters Inc." Based on unconfirmed reports out of Hollywood, Disney and Pixar may be near a deal giving Steve Jobs, Pixar' s chief executive and controlling shareholder, much of what he wants. Jobs is seeking to give Pixar greater profits and control of its next two movies, which are governed by the existing agreement with Disney. Pixar' s "The Incredibles" is due in late 2004 and "Cars" in November 2005. The current agreement gives Pixar, which is based in Emeryville, Calif., and Disney equal profits from the next two movies after Disney is paid a distribution fee estimated at 12% to 13% of total revenues. This effectively gives Disney more than 60% of each movie' s profits. Pixar BY ANDREW BARY and Disney share the cost of producing and marketing the movies, which can run over $200 million for each. Jobs also reportedly wants Pixar to get all the profits from its eighth movie, due in late 2006, in return for bearing all the costs. Disney would get just a distribution fee of 7% to 10% in the new arrangement. Under the terms of the current Disney contract, Pixar was