Eisner’s Disney exit reopens Pixar talks

/ Source: CNBC

Now that Walt Disney’s controversial CEO Michael Eisner is set to depart, making way for Disney President Robert Iger to step into the company’s leadership role, analysts expect the media giant to reopen talks on a distribution deal with Pixar Animation Studios.

Because of his turbulent relationship with Pixar Chief Executive Steve Jobs, Eisner was seen as the main stumbling block for Disney to renew its lucrative partnership with Pixar, which has produced such blockbuster films as “Toy Story,” “Finding Nemo” and “The Incredibles” in its partnership with Disney.

Lehman Brothers’ entertainment analyst Anthony DiClemente says the Pixar deal has proven to be very important to the Disney organization, as the animation company shares half the money it makes from its movies with Disney.

“No one knows exactly the percentage of that distribution fee, but Pixar receives 50 percent of the post-distribution profits,” DiClemente said. “So the equity from films is split fifty-fifty between Pixar and Disney.”

Pixar’s exclusive deal with Disney is set to expire next year, opening up the right to distribute Pixar movies. And so if Disney is to reestablish its agreement with Pixar, the animation firm is seen as holding a better bargaining position with its former partner analysts say.

Disney needs [Pixar] very badly says Fulcrum Global Partners analyst Rich Greenfield, and so there will be a lot of pressure on Disney if it re-negotiates with Pixar. “Bob Iger, once he takes over, will be faced with this negotiation as one of his first acts as CEO,” he said.

Greenfield also said Steve Jobs would likely press his advantage to get better terms than he could have squeezed from Eisner. Pixar films have taken about $3 billion at the box office worldwide, and Disney has had the bigger share of the profit.

“The pressure is on Disney, not Pixar,” Greenfield said.

Incoming Disney CEO Bob Iger hasn’t specified how he plans to handle the sensitive situation with Pixar. But Laura Martin, an entertainment analyst with Soleil Securities, is optimistic.

“I think the relationship between Bob Iger and Steve Jobs is much better than the relationship between Steve jobs and Michael Eisner,” Martin said. “Therefore, I would expect Pixar and Disney to have a far more fruitful conversation ... and Wall Street would like Pixar to remain within the Disney fold.”

Lehman’s DiClemente says Iger is known as more of a consensus builder: “Someone who is more approachable, a little bit more likely to reach a negotiable deal as opposed to Eisner, who’s reputation is more of an empire builder, more of a strong personality.”

Last month, Jobs told analysts that Pixar “likely ... will not forge a new relationship with Disney beyond our current deal,” but did not elaborate about how far talks with Disney had progressed or where else Pixar might look for a partner.

Pixar has pushed back its target date for finding a new distributor a number of times and said that “musical chairs” in Hollywood was part of the reason, giving some hopes that a new Disney deal is a possibility.