Wall St.’s Wish Upon a Star

In “The Incredibles,” next month’s computer-animated offering from Pixar Animation Studios and Walt Disney Co., a bored superhero with a bulging waistline springs back from retirement to save the world.

For the two companies, rescuing a planet seems a snap compared with saving a relationship that began imploding in January when talks over renewing their partnership collapsed. But with that deal nearing doomsday, there are flickers of optimism that one of Hollywood’s most successful collaborations may be salvaged.

Opening Nov. 5, “The Incredibles” marks the next-to-last film under the Pixar-Disney partnership that is set to end with the release of its next movie, “Cars,” in November 2005.

To date, the two companies have joined forces on five consecutive digitally animated hits: two “Toy Story” films, “Monsters, Inc.,” “A Bug’s Life” and “Finding Nemo.” Those movies are expected by analysts to ultimately generate more than $3 billion in total profit, split between the two sides.

Despite those successes, Pixar Chief Executive Steve Jobs walked away in frustration from negotiations that would have extended the 13-year relationship. The talks had dragged on for nearly a year as Disney CEO Michael Eisner refused to agree to some of Jobs’ more aggressive demands -- notably that Pixar would retroactively own all the movies and control sequels, if they were made.

The personal animus between Jobs and Eisner is widely believed to have played a central role in the dissolution of the partnership.

Last month, however, the Disney chief of 20 years announced that he would leave the company when his contract expired in September 2006.

Although many on Wall Street remain convinced that reconciliation is a lost cause, others close to both parties hold out a glimmer of hope now that Eisner is leaving. Disney’s board is expected to identify a successor by June.

People close to Jobs say he would be open to resuming talks with Eisner’s successor.

“It’s fair to say that given the successful partnership, investors would be happy if these two companies came together,” said Lowell Singer of SG Cowen & Co. “I think Eisner’s impending departure keeps the door open for that possibility.”

In an interview, Jobs, who is recovering from successful pancreatic cancer surgery, declined to answer questions about the Disney-Pixar disagreements. He said the companies were focused for now on making “The Incredibles” a success. He did, however, note that yet another Pixar hit would open up even more opportunities for the Emeryville, Calif.-based company.

“Pixar is lucky enough to be five-for-five,” Jobs said. “If ‘Incredibles’ makes that six-for-six ... it gives us wonderful options to work with all sorts of people.”

With $755 million in cash and no debt, Pixar is poised to finance its own movies and reap the profits, paying a studio a fee to distribute the movies in theaters and on DVD. Another hit would give Jobs even more leverage with Disney or any replacement studio.

At Disney, some executives aren’t ready to concede defeat.

“I would love to think it’s never over until it’s over,” Disney studio Chairman Dick Cook said. “There hasn’t been anything quite like it,” he added, referring to the partnership’s winning streak.

Disney President Robert Iger, however, recently sounded resigned when asked at a London television conference about the company’s future with Pixar.

“It would be nice to continue that relationship into infinity, but

Iger suggested that Pixar had “weaned itself from its need for Disney” and its dependence on the Burbank entertainment giant’s checkbook to fund production, as well as Disney’s marketing and distribution prowess.

But people close to the Disney president said he had privately expressed regret for coming across as too pessimistic. They said Jobs liked Iger, the company’s lone internal succession candidate, and would be open to resuming talks if the executive replaced Eisner.

The two sides haven’t bargained since Jobs pulled the plug in January.

Disney continues to hold one card other Pixar suitors can’t play: future profit on next year’s “Cars.”

As it stands now, Disney and Pixar would share the receipts. But during earlier negotiations, Disney indicated that it would be willing to fold both “The Incredibles” and “Cars” into a new arrangement giving Pixar full profits on all future films. Disney’s money would have come from a distribution fee, estimated by analysts at as much as $100 million a picture.

Disney’s willingness to forfeit profits on those two films suggests the company may still be flexible on giving up its share of the profit from “Cars.”

In the near term, though, Disney stands to profit richly from the old agreement.

Wall Street is counting on “The Incredibles” to be a big hit despite carrying Pixar’s first PG rating, for intense action. “The Incredibles” also is the first Pixar film featuring humanlike characters in lead roles instead of toys, bugs, monsters or fish. Jobs said the appeal of “Incredibles” was that, like other Pixar movies, it was unique and “not formulaic.”

Although analysts don’t see “The Incredibles” equaling the box-office success of last year’s “Finding Nemo,” which was Pixar’s biggest hit with more than $860 million in worldwide ticket sales, they expect another blockbuster.

Analysts estimate that “The Incredibles” will gross $500 million to $600 million in global box-office receipts. Hundreds of millions more are expected to flow over the life of the film from TV airings and DVD and merchandise sales.

For Disney, the film’s success could cut two ways. Although the company would profit from a hit, the success also would be a painful reminder to shareholders of the impending loss of a steady creative partner after Disney’s own bedrock animation business faltered with “Treasure Planet,” “Home on the Range” and other disappointments. Disney also has yet to prove it can make the kind of computer-animated hits audiences now crave.

“Not having Pixar will be a very meaningful loss,” said media analyst Jessica Reif Cohen of Merrill Lynch & Co. She said that in some years Pixar had accounted for more than 50% of Disney’s film revenue

Given the corporate tensions, cynics have speculated that Disney wouldn’t put its usual marketing juggernaut behind “The Incredibles” or “Cars.”

But studio executives said Disney was spending more than $55 million on the domestic marketing campaign alone. The studio also has such major advertisers as McDonald’s Corp. and Kellogg Co. backing the film.

“We’re in this with” Pixar, said studio boss Cook, “regardless of what else is going on.”