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Analysts: New Disney CEO to Tread Lightly

17 Mar, 2005 By: Kurt Indvik

Robert Iger

Don't expect Robert Iger to rush into any deal with Steve Jobs to keep Pixar in partnership with the Walt Disney Co., analysts say.

Iger, 54, formally takes over as CEO of Disney Oct. 1, and Jobs is reportedly waiting for the new CEO before concluding any negotiations with Disney. Embattled CEO Michael Eisner, who has clashed with Jobs, will step down as CEO after 21 years, but will remain on the company's board of directors until his term expires in early 2006.

Cementing a deal with Pixar is not a make-or-break situation, according to Harold Vogel, president of Vogel Capital Management and author of the book Entertainment Industry Economics. “I think there is a degree of importance to [a Pixar deal], but it's not like Disney will collapse and fall apart of it doesn't happen,” Vogel said.

“We do not believe Mr. Iger will be willing to enter into an overly favorable deal with Pixar just to appear friendly to the creative community or to curry positive press,” said Deutsche Bank analyst Douglas Mitchelson in a note to investors, quoted by the Associated Press.

Vogel noted that Disney has played its DVD business “pretty smart” over the last several years, placing major animation properties into moratorium for timed releases. “They have maximized their home video products, and I don't think there is much Iger needs to do with that business,” he said.

Pixar has had a major impact on Disney's revenue with The Incredibles, Finding Nemo, Monsters, Inc., and other hits, and Vogel said Pixar is right to use that leverage in negotiating a new deal. “When Pixar was weaker they offered [Disney] an attractive profit and gave away a lot of rights to do sequels. Now they want [some of] it back,” Vogal said. Pixar is driving a hard bargain, Vogel added, and current Eisner and Disney have been resisting.

“Normally, this could have been resolved, I think, but unfortunately personality clashes got in the way,” Vogel said. While Iger will not give away Disney's shareholder interests, his personality might allow for the parties to find some middle ground. “He might be able to do it,” Vogel said. “Steve Jobs might be more accommodating with Iger, but he won't be an easy negotiator. He'll demand a lot.”

Disney could bring additional leverage to the table, if it's newest animated feature — Chicken Little, slated to come out later this year — is a success. Meanwhile, published reports indicate that Disney is ramping up with a full division dedicated to producing sequels to some of the Pixar films it has rights to, including a Toy Story 3, which could rankle Jobs.

Vogel also noted that Disney's relationship with the Weinstein brothers, founders of Miramax, may be too broken to repair. But he added that he sees little evidence that the Weinsteins have been successful in establishing significant financing for their own new interests in a post-Disney era, and in that, “Iger could extend an olive branch.”

“This is Hollywood,” he said. “You never know. There are always strange endings.”

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