updated 7/27/2005 6:26:23 PM ET 2005-07-27T22:26:23

Ronald McDonald is ditching Mickey Mouse for Shrek.

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McDonald's Corp. said Wednesday it has signed a two-year, non-exclusive deal to promote DreamWorks Animation SKG films beginning with the release of "Shrek 3" in 2007.

McDonald's previously said it wanted to try a new approach to marketing partnerships when its exclusive 10-year deal with The Walt Disney Co. expires next year.

"Ten years is a very long time," said Larry Light, global chief marketing officer at McDonald's, the world's largest fast food chain. "The world changes more than once in 10 years. I don't anticipate that we'll be making 10-year deals in the future with anybody."

The announcement was expected by Disney, which has yet to say which fast food promotional partner it might work with in the future.

After the deal with McDonald's expires, "both companies will then have the flexibility to develop projects on a non-exclusive basis," Disney said in a prepared statement.

Financial terms of the new agreement were not released. It also ends DreamWorks' promotional arrangement with Burger King.

The relationship between McDonald's and Disney has been marked by several notable successes, including "101 Dalmatians" and "Finding Nemo." But there were also disappointments tied to Disney flops such as "Atlantis: The Lost Empire" and "Treasure Planet."

The results were inconsistent in part because promotions must be planned at least a year in advance — long before it's known whether a film will succeed or fail.

The agreement will include promoting DreamWorks films with toys in Happy Meals. But it will go beyond typical marketing efforts to include pairing pitchman Ronald McDonald with Shrek and other DreamWorks characters in ads.

It will be the first time McDonald's iconic "chief happiness officer" has shared the spotlight with non-McDonald's characters.

McDonald's said it was talking to Disney and other firms about other possible marketing relationships but did not say if it expects to promote Disney films after next year.

DreamWorks chief executive Jeffrey Katzenberg said he was not worried about McDonald's possibly working with one of his competitors.

"We encourage them to," Katzenberg said. "The stronger the brand is, the stronger their relationship is with their consumer. It's good for both of us."

Analysts said the two-year deal makes better sense for both parties than a longer-term agreement.

"You never know what market forces may be at work on either the restaurant side or the film production side," said David Miller, an analyst with Sander Morris Harris.

Miller said promotional deals with fast food companies can help build advance awareness of movies, but no amount of promotion can save a flop.

"The best publicity for movies is word of mouth," he said. "It doesn't matter what kind of little figurines you get in a Happy Meal. Ultimately the film has to work."

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