Pixar Profit Drops 48% in Movie-Release Lull

Pixar Animation Studios said first-quarter profit fell 48% and revenue dropped 50%, largely because it didn’t have a new movie playing during the period.

Net income fell to about $8.2 million, or 15 cents a share, from $15.6 million, or 30 cents, a year earlier. Revenue was $18.7 million, down from $37.1 million in the year-earlier quarter, which included overseas box office receipts from “Monsters, Inc.”

The Emeryville, Calif.-based company’s results fluctuate with the distribution cycle of its films. “Monsters, Inc.,” its last release, opened in November 2001, and “Finding Nemo” won’t hit theaters until May 30.

Pixar said fourth-quarter and year-end earnings will be heavily affected by “Nemo,” which will open on more than 5,500 screens this summer and will be released on video and DVD during the year-end holiday period. Pixar has not released a film to both theatrical and home markets during the same year.

In a conference call with analysts, Pixar Chairman Steve Jobs, also co-founder and chief executive of Apple Computer Inc., was circumspect about the prospects for reaching a new distribution pact with longtime partner Walt Disney Co.

“We’ve said that we’re going to be negotiating a new distribution deal in the coming year” with Disney or another studio, Jobs said. “That’s all we’re really going to say about that at this time.”

The companies, which have had strained relations despite past successes, are expected to start negotiating next month to extend their deal beyond its November 2005 expiration.

Jobs has met with top executives from AOL Time Warner Inc.’s Warner Bros., Sony Pictures and News Corp.-owned 20th Century Fox, all of whom have expressed interest in allying with Pixar should a new deal with Disney fail to materialize.

No matter which partner Pixar winds up with, Jobs wants his company to retain all the profits and pay a studio a fee to release its movies. With more than $450 million in cash and zero debt, said Jobs, Pixar can easily finance its films and double its profit “without additional work.”

A major source of tension between Jobs and Disney Chairman Michael Eisner has been their opposing opinions as to whether sequels count toward films Pixar contractually owes Disney. Because the contract states that sequels don’t count, and Jobs believes they should, there has been no sequel made to the lucrative “Toy Story 2.”

Jobs appeared to tweak Disney by telling analysts that Pixar has a “great idea for ‘Toy Story 3.’ ” He also said Pixar has a “still-secret film” in development for 2006 that falls outside its deal with the studio.

Shares of Pixar rose 78 cents to $59.41 in Nasdaq trading before the earnings were announced.