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Even allowing for Hollywood's current woes (See BW Online, 9/28/01, "On with the Show? Not These Days"), you might think that Walt Disney's relationship with Pixar, the northern California film studio that turned out such computer-generated gems as the two Toy Story movies and A Bug's Life, would be giving the Mouse Factory reason to cheer. On Nov. 2, Disney will release Pixar's latest film, Monsters, Inc., which stars the voices of Billy Crystal and John Goodman as some friendly monsters that hide in kids' closets.
If Hollywood buzz about upcoming films counts for anything, Monsters, Inc. is likely to be another megahit for the companies. The duo has been nothing short of sensational from the moment they released Toy Story in 1995. Each of the three films they've done together has soared well past the $100 million box-office mark that certifies them as blockbusters. Their latest, 1999's Toy Story 2, grossed $245 million in the U.S. alone, placing it second only to Disney's The Lion King among animated films.
The requisite happy ending may not be in the cards for this Hollywood couple, however. Even as they beat the drum for their next film, the Hollywood buzz also has it that the two are feuding over things big and small. This is especially problematic because the superstar companies are attached to one another for three more films.
Hollywood power players are wondering if the two are instead headed for a messy divorce. Neither company would comment for this story, although executives for both acknowledge privately that things haven't been going all that smoothly between them.
MONEY MATTERS. The fight seems focused mainly on a third Toy Story movie. Both companies want it made -- and who can blame them? The first two have generated north of $400 million in revenues that the companies have split -- albeit not equally. The issue is: Will the partners collaborate on this film, or will Disney go it alone? The question has huge implications for -- what else? -- which outfit gets the lion's share of the money, allowing that it's a hit. Then throw in Steve Jobs, the tempestuous Apple founder who also happens to be Pixar's chairman and majority shareholder, and you get an idea of just how volatile things may be behind closed doors.
A little background: Pixar and Disney have worked together since 1986, when Pixar began providing the software for a computer system that Disney used to duplicate animated film cels. In 1991, the companies stepped up their relationship, and Pixar signed on to boot up those computers to make its first feature film, which was Toy Story. Under that deal, Disney put up most of the money and took most of the profits.
After the smashing success of Toy Story, the deal between Pixar and Disney was amended in 1997. Under the revision, Pixar's computer-wielding animators were to spit out five more films with Disney, with the companies pretty much sharing the costs equally and splitting the revenues.
NOT-SO-SIMPLE ARITHMETIC. Insiders tell me the interpretation of parts of that second deal is the crux of the companies' current issue. After Toy Story 2, Disney started pushing to make a third installment starring Woody, Buzz Lightyear, and crew. Would it count against the three films that Pixar still owes Disney under the 1997 deal? (A Bug's Life and Monsters, Inc. are the first two.) Disney doesn't want Toy Story 3, if there is one, to count against the five-picture deal, insiders say, while Pixar will only make the film if it does.
Pixar has good reason for wanting it to count. The sooner it finishes up its deal with Disney, the sooner it can put itself up for sale, partner with another studio, or make an even more advantageous deal with the Mouse. Also, Pixar will take a bigger share of the profits if Toy Story 3 counts against the deal. However, Disney reasons that Toy Story 3, because it's a sequel to a film that was being made while the second deal was being negotiated, doesn't really count.
Complicating this monstrous mess is the sometimes-stormy relationship Disney has had with Steve Jobs. Pixar is allowed to come up with story ideas and develop scripts, but has to do so with the approval of Disney. But Disney, well-known in Hollywood circles for its hands-on management style, showers Pixar with ideas and Disney executives are constantly flying north to see Pixar executives. In Hollywood, that's a recipe for high-octane feuding.
Moreover, Jobs prides himself on being a world-class marketer and wasn't shy about offering up his own ideas -- despite Disney's well-deserved reputation for knowing how to open a movie. Already the two are said to be tussling over which company will get to stake claim to having made Monsters, Inc. when it comes time to lobby for Academy Award nominations.
FIGHTING CHANCE. How all this will play out is anyone's guess. Some years back, Disney created its own computer-driven studio not far from the Burbank Airport, ostensibly to turn out the 2000 computer-generated film Dinosaur. Creating the studio was also seen by Pixar folks as a none-too-subtle message that Disney, too, could fire up its own computers to create world-class animated movies. Dinosaur did a very spiffy $137.7 million at the box office.
As a counter move, Jobs signed Pixar's top creative talent, Academy Award-winning director John Lassiter, to a new 10-year contract earlier this year, paying the Toy Story and Bug's Life director a cool $2.5 million a year, a $4.9 million bonus, and a boatload of Pixar stock options. Lassiter, a former Disney animator, is a favorite with Disney executives and is widely regarded as being one of the major reasons the studio continue to do business with Pixar.
Odds are that Disney and Pixar will coexist for a while longer, albeit with the same sort of friction that Woody and Buzz Lightyear displayed in the first Toy Story. Amid the fighting, they'll likely continue to churn out blockbusters. But somewhere down the road -- and it may not that far -- the two companies will have to figure out what to do with the third Toy Story, as well as the rest of their five-picture deal. Maybe Disney will buy Pixar before then. And if those neogiations take place? Well, that really will be Monsters, Inc.
Grover is Los Angeles bureau chief for BusinessWeek. Follow his weekly Power Lunch column, only on BW Online Edited by Patricia O'Connell
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Copyright 2001 , by The McGraw-Hill Companies Inc. All rights reserved.
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