No Pixar Deal Yet, Disney Chairman Tells Board

Walt Disney Co. Chairman Michael Eisner advised board members Tuesday that the entertainment giant and Pixar Animation Studios remained far apart in their closely watched negotiations to strike a new long-term deal, according to sources familiar with the situation.

The Disney chief executive had hoped to present to the board a financial arrangement that would extend the successful relationship between the companies beyond their current contract, which expires in 2005. Instead, he delivered a more somber message during the regularly scheduled board meeting, indicating that the two sides still have some major issues to sort out, sources said.

Although Disney directors would like to see a new deal with Pixar -- considered the industry leader in computer animation -- they made it clear to Eisner on Tuesday that he should accept only a contract that makes financial sense for the Burbank-based entertainment giant, sources said.

Representatives from Disney and Pixar declined to comment on the talks.

For several weeks, the parties have been embroiled in contract negotiations with little give and take from either side, sources close to the talks say.

Eisner has balked at an aggressive proposal by Pixar to radically alter the financial terms of the partnership.

Currently, Disney and Pixar split the profits from the movies that they co-finance. Disney also gets a 12.5% fee to distribute the films. Pixar has proposed that it own its movies outright and pay Disney a distribution fee, possibly 10% or less.

Such an arrangement could cost Disney hundreds of millions in lost profit.

The five movies that Pixar and Disney have released, including the blockbusters “Finding Nemo” and “Monsters, Inc.,” have amassed more than $1 billion in total profits for the partners and accounted for nearly half of Disney Studios’ operating profit in recent years.

For its part, Pixar would lose the global marketing and distribution clout of the Disney family brand while taking on the added risk of financing its own movies.

Still, Pixar Chairman Steve Jobs has made no secret that there are several other suitors prepared to step into Disney’s shoes, among them AOL Time Warner Inc.’s Warner Bros., News Corp.’s 20th Century Fox, and Sony Corp.’s Sony Pictures Entertainment.

Another sticking point in the negotiations involves the two remaining films under the partners’ current five-picture deal, “The Incredibles” and “Cars.” Pixar wants those films to fall under the terms of a new contract, while Disney wants the existing arrangement to apply.

In the past, Jobs was successful in persuading Disney to renegotiate the companies’ original 1991 contract after their first release, “Toy Story,” became an unexpected hit in 1995.

During Tuesday’s daylong meeting, Disney executives also updated the board on each of the company’s business units, including the still-struggling ABC television division and the live-action movie studio, which has enjoyed a stellar year at the box office.